Monetary Policy and Regional Interest Rates in the United States, 1880-2002
AbstractThe long running debate among economic historians over how long it took regional financial markets in the United States to become fully integrated should be of considerable interest to students of monetary unions. This paper reviews the debate, discusses the implications of various hypotheses for the optimality of the US monetary union, and presents some new findings on the origin and diffusion of monetary shocks. It appears that financial markets were integrated in the late nineteenth and early twentieth centuries in the sense that monetary shocks were routinely transmitted from one part of the United States to another. In particular, shocks to interest rates in the eastern financial centers were routinely transmitted to the periphery. However, it also appears that during this period significant shocks to bank lending rates in the periphery often arose on the periphery itself. This suggests that a nineteenth century monetary authority that relied on operations confined to eastern financial centers would have had a difficult time managing the U.S. monetary union. After World War II the problem of eruptions on the periphery declined.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10924.
Date of creation: Nov 2004
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Note: DAE ME
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Find related papers by JEL classification:
- N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
- NEP-CBA-2004-11-22 (Central Banking)
- NEP-HIS-2004-11-22 (Business, Economic & Financial History)
- NEP-MAC-2004-11-22 (Macroeconomics)
- NEP-MON-2005-01-10 (Monetary Economics)
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